Przemyslaw Radomski, CFA's InstablogPrzemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.
His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.
Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.
High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.
PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.
As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.Przemyslaw Radomski, CFAhttp://seekingalpha.com/author/p/r/z/przemyslaw-radomski-cfa/instablog
Sunshine Profits: Will Gold And Silver Increase From Here?http://seekingalpha.com/instablog/422923-przemyslaw-radomski-cfa/2567541-sunshine-profits-will-gold-and-silver-increase-from-here?source=feed
2567541Will Gold and Silver Increase from Here?

In our previous article on gold, we examined the situation in the U.S. dollar and the euro as many times in the past they gave us important clues about future precious metals' moves. At that time we wrote in the summary:

(…) gold's lack of will to really (!) react to positive news, like the dollar's huge intra-day drop, is a bearish piece of information on its own and an indication that gold is likely to move lower in the short run.

On the next trading day, after the essay was posted, gold and silver declined and dropped to their fresh monthly lows. With this downward move gold almost touched the June low. This strong support level encouraged buyers to push the buy button and the yellow metal, which last week saw its best week since October, rebounded to around $1,250. At the same time, silver came back above $20.

Will the recent week's rally continue? Before we try to answer this question, we'll examine the long-term charts of gold and silver to see if there's anything on the horizon that could these precious metals higher or lower in the near future. We'll start with the long-term chart of gold (charts courtesy by stockcharts.com).

(click to enlarge)

Even though a lot happened last and this week, from the long-term perspective not much changed on the gold market.

We saw a move back to the rising long-term resistance line (currently close to $1,250), but gold only touched it, only to decline once again. At this time the medium-term outlook remains bearish. Any additional rally is not likely to move significantly above this level (from this perspective significantly means not more than $50 above it, which takes significant intra-day volatility into account).

Please note that the exact target for gold is quite difficult to provide. In the cases of silver and mining stocks there are respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000.

Taking into account the current situation in the yellow metal, the above price targets remain valid.

Let's take a look at the chart featuring gold's price from the non-USD perspective.

(click to enlarge)

From the non-USD perspective, gold simply moved back to the previously broken support line and verified it as resistance. There was only an intra-week move above it, but the price is already back below the line, and it seems that it will close the week below it as well. Please note that in the final part of 2013 we also saw one intra-week move back above this line and this move was even more significant than what we saw this week. It too didn't invalidate the breakdown. In fact, it was followed by a significant downswing. We can expect the situation to be quite similar shortly, if gold does indeed rally. The move higher could be temporary, and unless we have a weekly close above the rising support line (dashed line, currently close to 46), we will not have any bullish implications whatsoever.

Even if we see some strength, the ratio would have to move above 48 (where the upper declining resistance line is currently located) in order for the situation to become bullish.

Consequently, some short-term strength is clearly possible, but we don't think that the medium-term downtrend will be invalidated.

Having discussed the current situation in gold, let's take a look at the long-term chart of silver.

(click to enlarge)

It is often said that history repeats itself (or that it rhymes) and it surely applies when we look at silver's recent performance.

At the end of December silver moved temporarily back above the rising support/resistance line, but didn't manage to hold this level. The white metal gave up the gains and dropped below both long-term support/resistance lines, which triggered further deterioration.

This week, the white metal made another attempt to move back above the resistance lines, but failed to move above the upper of them and ultimately the breakdown below these lines was not invalidated.

The next downside target is the previous 2013 low, slightly above the $18 level. Once we see silver below it, the next (and probably final) stop will likely be close to $16. Overall, the trend remains down.

Summing up, looking at the current situation in gold and silver, we see that the medium-term trends remain down and the outlook for both remains bearish. However, on a short-term basis we can expect to see a temporary move higher. In case of gold, it doesn't seem that the yellow metal will move above $1,250, and even if that happened, it would not be likely to move above $1,285 and change the medium-term trend. In the case of silver, given the white metal's back-and-forth performance in the recent weeks, we also can't rule out another move higher before the next big move down materializes.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

In our previous article on gold, we examined the situation in the U.S. dollar and the euro as many times in the past they gave us important clues about future precious metals' moves. At that time we wrote in the summary:

(…) gold's lack of will to really (!) react to positive news, like the dollar's huge intra-day drop, is a bearish piece of information on its own and an indication that gold is likely to move lower in the short run.

On the next trading day, after the essay was posted, gold and silver declined and dropped to their fresh monthly lows. With this downward move gold almost touched the June low. This strong support level encouraged buyers to push the buy button and the yellow metal, which last week saw its best week since October, rebounded to around $1,250. At the same time, silver came back above $20.

Will the recent week's rally continue? Before we try to answer this question, we'll examine the long-term charts of gold and silver to see if there's anything on the horizon that could these precious metals higher or lower in the near future. We'll start with the long-term chart of gold (charts courtesy by stockcharts.com).

(click to enlarge)

Even though a lot happened last and this week, from the long-term perspective not much changed on the gold market.

We saw a move back to the rising long-term resistance line (currently close to $1,250), but gold only touched it, only to decline once again. At this time the medium-term outlook remains bearish. Any additional rally is not likely to move significantly above this level (from this perspective significantly means not more than $50 above it, which takes significant intra-day volatility into account).

Please note that the exact target for gold is quite difficult to provide. In the cases of silver and mining stocks there are respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000.

Taking into account the current situation in the yellow metal, the above price targets remain valid.

Let's take a look at the chart featuring gold's price from the non-USD perspective.

(click to enlarge)

From the non-USD perspective, gold simply moved back to the previously broken support line and verified it as resistance. There was only an intra-week move above it, but the price is already back below the line, and it seems that it will close the week below it as well. Please note that in the final part of 2013 we also saw one intra-week move back above this line and this move was even more significant than what we saw this week. It too didn't invalidate the breakdown. In fact, it was followed by a significant downswing. We can expect the situation to be quite similar shortly, if gold does indeed rally. The move higher could be temporary, and unless we have a weekly close above the rising support line (dashed line, currently close to 46), we will not have any bullish implications whatsoever.

Even if we see some strength, the ratio would have to move above 48 (where the upper declining resistance line is currently located) in order for the situation to become bullish.

Consequently, some short-term strength is clearly possible, but we don't think that the medium-term downtrend will be invalidated.

Having discussed the current situation in gold, let's take a look at the long-term chart of silver.

(click to enlarge)

It is often said that history repeats itself (or that it rhymes) and it surely applies when we look at silver's recent performance.

At the end of December silver moved temporarily back above the rising support/resistance line, but didn't manage to hold this level. The white metal gave up the gains and dropped below both long-term support/resistance lines, which triggered further deterioration.

This week, the white metal made another attempt to move back above the resistance lines, but failed to move above the upper of them and ultimately the breakdown below these lines was not invalidated.

The next downside target is the previous 2013 low, slightly above the $18 level. Once we see silver below it, the next (and probably final) stop will likely be close to $16. Overall, the trend remains down.

Summing up, looking at the current situation in gold and silver, we see that the medium-term trends remain down and the outlook for both remains bearish. However, on a short-term basis we can expect to see a temporary move higher. In case of gold, it doesn't seem that the yellow metal will move above $1,250, and even if that happened, it would not be likely to move above $1,285 and change the medium-term trend. In the case of silver, given the white metal's back-and-forth performance in the recent weeks, we also can't rule out another move higher before the next big move down materializes.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Many times in our previous essays we have written that if you want to be an effective and profitable investor, you should look at the situation from different perspectives and make sure that the actions that you are about to take are really justified. Therefore, at the beginning of the month we examined gold and silver mining stocks to find out what kind of impact they could have on precious metals' future moves. Back then, we concluded that the medium-term outlook for gold was bearish and mining stocks seemed to be leading gold lower. To make sure that our assumptions were correct, we decided to check the chart featuring gold's price from the non-USD perspective and also from the European perspective. You could read the conclusions in our essay from Dec. 6, 2013.

(…) the medium-term outlook for gold remains bearish and it seems that we might see another sizable downswing shortly.

In the following days, after the essay was posted, gold, silver and mining stocks reversed and started their recent declines. Day by day, we saw lower values of gold, silver and mining stock indices. With this downward move, the yellow metal, the HUI Index and the AXU Index declined below their December's lows (to be precise: at the same time silver dropped to slightly above its previous low).

Taking these circumstances into account, you are probably wondering whether the recent declines will continue or not. Although we saw a small rebound in the early European session, we clearly see that the precious metal sector remains weak.

As we emphasized in our previous essays, many times in the past the situation in the U.S. dollar and the euro gave us important clues about future precious metals' moves. Therefore, today we'll examine the US Dollar Index (from many perspectives) and the Euro Index to see if there's anything on the horizon that could drive the precious metal market higher or lower in the near future. We'll start with the medium-term USD Index chart (charts courtesy by stockcharts.com).

(click to enlarge)

Looking at the above chart, we see that earlier this week we had a similar situation to the one that we saw last week. Just like a week ago, the USD Index broke below the medium-term support line based on the February 2012, September 2012 and January 2013 lows (the bold black line) and the lower medium-term line based on the September 2012 and the January 2013 lows (the thin black line). However, once again this deterioration was only temporary. The dollar quickly rebounded and invalidated the breakdown below both medium-term support/resistance lines, which is a sign of strength and a bullish factor. From this perspective, there was no true breakdown and the trend remains up.

Let's check the short-term outlook.

(click to enlarge)

On the above chart, we see that earlier this week, the USD Index tried to break above its horizontal support line based on the June low without a positive result. These circumstances triggered a sharp decline on Wednesday - just before the Fed released its statement. However, the greenback quickly reversed course when the Federal Reserve announced that it will start winding down its stimulus program (small, but still) and rallied above the 80.5 level.

With this upswing, the U.S. dollar broke above the declining short-term resistance line. Although, the USD Index declined in the following hours and came back below both resistance lines, it turned out on the following day that this small deterioration was temporary. On Tuesday, the greenback extended its rally and moved higher breaking above both resistance lines once again. Taking this fact into account, we can conclude that the outlook remains bullish and that it could be the case that the decline is already over and that another rally in the US Dollar is just starting.

Let's now take a look at the long-term Euro Index chart.

(click to enlarge)

The first thing that catches the eye on the above chart is the target area, which was reached once again.

In the previous week, the European currency almost reached the October high. Back then, it seemed that further growth was limited, not only because of this resistance level, but - even more importantly - because of the long-term declining resistance line based on the 2008 and 2011 highs (in terms of weekly closing prices). As a reminder, this strong resistance line successfully stopped growth in October and triggered a sharp decline. Additionally, at that time, a similar situation preceded a local top in precious metals. On top of that, previous tops (in 2008 and then in 2011) were followed by major declines in the precious metals sector. If history repeats itself, we may see similar price action in this situation.

Looking at the above chart, we clearly see that earlier this week the Euro Index reversed course after reaching a strong resistance zone and declined below the level of 137. What's most interesting, precious metals followed that decline, which suggests that we'll likely see further deterioration in the PM's sector - similarly to the one seen in the past.

Please take a moment to compare the euro's performance in the past few weeks with the performance of the precious metals sector (lower part of the above chart).

Let's now take a look at the medium-term Euro Index chart.

(click to enlarge)

Looking at the above chart, we see that the Euro Index climbed once again this week and reached its very strong resistance zone created by the previous 2013 high and the short-term rising support line based on the July and September lows. As you see on the weekly chart, the European currency didn't manage to break above these levels, which triggered a sharp decline and pushed the euro slightly above the 38.2% Fibonacci retracement level based on the Nov.-Dec. rally. From this perspective, the outlook for the coming weeks is bearish.

Having discussed the above, let's take a look at our Correlation Matrix to find out how all this can translate to precious metals and mining stock prices.

(click to enlarge)

Basically, the short-term numbers don't tell us much at this time when we look at them directly, but can tell us something if we look a bit beyond them.

The correlation between the USD Index and the precious metals sector is slightly positive in the 30-day column (and even moderately significant in the case of the mining stocks), which tells us that in the past 30 days PMs and the USD Index have moved on average in a similar direction. However, this was the case when they both declined. When the USD moved higher (this week), metals and miners declined even more. This is a very bearish combination - whatever the USD does, the precious metals sector seems to either decline modestly or strongly.

Once we know the relationship between the U.S. currency and the precious metal sector, let's check the current situation in gold.

(…) earlier thisweek we saw a major change on the above chart as gold broke below the rising long-term support line (…) theimplications are bearish, especially that the RSI indicator is currently not oversold - it's above 30 and well above its previous 2013 lows. Back in 2008, the RSI indicator moved close to its previous lows when the final bottom was in. In this case we would need to see much lower gold prices to have RSI close to the 20 level. The next stop for gold is at its 2013 low, slightly above $1,170. It seems to us, however, that this will not be the final bottom for this decline, we expect the final one to form close to $1,100, possibly even at $1,050.

Last week, we saw a very temporary move above the previously-broken rising long-term support line, which was followed by another decline. In our previous Premium Update, we wrote that if gold was not able to hold above this line despite a decline in the USD Index, then it was truly a weak market and quite likely to decline much more.

Looking at the above chart, we see that earlier this week we had such price action. Gold didn't manage to successfully climb above the rising long-term support line (not to mention staying above it), which triggered a sharp decline. With this downward move, the yellow metal not only declined below last week's low, but also slipped below the level of $1,200. These circumstances clearly show the weakness of the buyers and it seems that the previous 2013 low will be reached quite soon.

The exact target for gold is quite difficult to provide. For silver and mining stocks there are, respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000.

Summing up, the current situation in both currencies suggests that we are likely to see further deterioration in the Euro Index and improvement in the USD Index in the near future. Taking these facts into account and combining them with the current relationship between the U.S. dollar and the PMs, we can conclude that the implications for the precious metal market are bearish. Please note that the exact target for gold is quite difficult to provide based on the gold chart alone. While it's likely that the final bottom will form below $1,150 and above $1,000 (or at least not much below this level), if we want to get a more specific price projection, we should use other techniques, especially those which worked in mid-2013 when the previous gold's low was formed.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Many times in our previous essays we have written that if you want to be an effective and profitable investor, you should look at the situation from different perspectives and make sure that the actions that you are about to take are really justified. Therefore, at the beginning of the month we examined gold and silver mining stocks to find out what kind of impact they could have on precious metals' future moves. Back then, we concluded that the medium-term outlook for gold was bearish and mining stocks seemed to be leading gold lower. To make sure that our assumptions were correct, we decided to check the chart featuring gold's price from the non-USD perspective and also from the European perspective. You could read the conclusions in our essay from Dec. 6, 2013.

(…) the medium-term outlook for gold remains bearish and it seems that we might see another sizable downswing shortly.

In the following days, after the essay was posted, gold, silver and mining stocks reversed and started their recent declines. Day by day, we saw lower values of gold, silver and mining stock indices. With this downward move, the yellow metal, the HUI Index and the AXU Index declined below their December's lows (to be precise: at the same time silver dropped to slightly above its previous low).

Taking these circumstances into account, you are probably wondering whether the recent declines will continue or not. Although we saw a small rebound in the early European session, we clearly see that the precious metal sector remains weak.

As we emphasized in our previous essays, many times in the past the situation in the U.S. dollar and the euro gave us important clues about future precious metals' moves. Therefore, today we'll examine the US Dollar Index (from many perspectives) and the Euro Index to see if there's anything on the horizon that could drive the precious metal market higher or lower in the near future. We'll start with the medium-term USD Index chart (charts courtesy by stockcharts.com).

(click to enlarge)

Looking at the above chart, we see that earlier this week we had a similar situation to the one that we saw last week. Just like a week ago, the USD Index broke below the medium-term support line based on the February 2012, September 2012 and January 2013 lows (the bold black line) and the lower medium-term line based on the September 2012 and the January 2013 lows (the thin black line). However, once again this deterioration was only temporary. The dollar quickly rebounded and invalidated the breakdown below both medium-term support/resistance lines, which is a sign of strength and a bullish factor. From this perspective, there was no true breakdown and the trend remains up.

Let's check the short-term outlook.

(click to enlarge)

On the above chart, we see that earlier this week, the USD Index tried to break above its horizontal support line based on the June low without a positive result. These circumstances triggered a sharp decline on Wednesday - just before the Fed released its statement. However, the greenback quickly reversed course when the Federal Reserve announced that it will start winding down its stimulus program (small, but still) and rallied above the 80.5 level.

With this upswing, the U.S. dollar broke above the declining short-term resistance line. Although, the USD Index declined in the following hours and came back below both resistance lines, it turned out on the following day that this small deterioration was temporary. On Tuesday, the greenback extended its rally and moved higher breaking above both resistance lines once again. Taking this fact into account, we can conclude that the outlook remains bullish and that it could be the case that the decline is already over and that another rally in the US Dollar is just starting.

Let's now take a look at the long-term Euro Index chart.

(click to enlarge)

The first thing that catches the eye on the above chart is the target area, which was reached once again.

In the previous week, the European currency almost reached the October high. Back then, it seemed that further growth was limited, not only because of this resistance level, but - even more importantly - because of the long-term declining resistance line based on the 2008 and 2011 highs (in terms of weekly closing prices). As a reminder, this strong resistance line successfully stopped growth in October and triggered a sharp decline. Additionally, at that time, a similar situation preceded a local top in precious metals. On top of that, previous tops (in 2008 and then in 2011) were followed by major declines in the precious metals sector. If history repeats itself, we may see similar price action in this situation.

Looking at the above chart, we clearly see that earlier this week the Euro Index reversed course after reaching a strong resistance zone and declined below the level of 137. What's most interesting, precious metals followed that decline, which suggests that we'll likely see further deterioration in the PM's sector - similarly to the one seen in the past.

Please take a moment to compare the euro's performance in the past few weeks with the performance of the precious metals sector (lower part of the above chart).

Let's now take a look at the medium-term Euro Index chart.

(click to enlarge)

Looking at the above chart, we see that the Euro Index climbed once again this week and reached its very strong resistance zone created by the previous 2013 high and the short-term rising support line based on the July and September lows. As you see on the weekly chart, the European currency didn't manage to break above these levels, which triggered a sharp decline and pushed the euro slightly above the 38.2% Fibonacci retracement level based on the Nov.-Dec. rally. From this perspective, the outlook for the coming weeks is bearish.

Having discussed the above, let's take a look at our Correlation Matrix to find out how all this can translate to precious metals and mining stock prices.

(click to enlarge)

Basically, the short-term numbers don't tell us much at this time when we look at them directly, but can tell us something if we look a bit beyond them.

The correlation between the USD Index and the precious metals sector is slightly positive in the 30-day column (and even moderately significant in the case of the mining stocks), which tells us that in the past 30 days PMs and the USD Index have moved on average in a similar direction. However, this was the case when they both declined. When the USD moved higher (this week), metals and miners declined even more. This is a very bearish combination - whatever the USD does, the precious metals sector seems to either decline modestly or strongly.

Once we know the relationship between the U.S. currency and the precious metal sector, let's check the current situation in gold.

(…) earlier thisweek we saw a major change on the above chart as gold broke below the rising long-term support line (…) theimplications are bearish, especially that the RSI indicator is currently not oversold - it's above 30 and well above its previous 2013 lows. Back in 2008, the RSI indicator moved close to its previous lows when the final bottom was in. In this case we would need to see much lower gold prices to have RSI close to the 20 level. The next stop for gold is at its 2013 low, slightly above $1,170. It seems to us, however, that this will not be the final bottom for this decline, we expect the final one to form close to $1,100, possibly even at $1,050.

Last week, we saw a very temporary move above the previously-broken rising long-term support line, which was followed by another decline. In our previous Premium Update, we wrote that if gold was not able to hold above this line despite a decline in the USD Index, then it was truly a weak market and quite likely to decline much more.

Looking at the above chart, we see that earlier this week we had such price action. Gold didn't manage to successfully climb above the rising long-term support line (not to mention staying above it), which triggered a sharp decline. With this downward move, the yellow metal not only declined below last week's low, but also slipped below the level of $1,200. These circumstances clearly show the weakness of the buyers and it seems that the previous 2013 low will be reached quite soon.

The exact target for gold is quite difficult to provide. For silver and mining stocks there are, respectively: combinations of strong support levels, and a major support in the form of the 2008 low. In the case of gold, there are 4 support levels that could stop the decline and each of them is coincidentally located $50 below the previous one starting at $1,150: $1,150, $1,100, $1,050, and $1,000.

Summing up, the current situation in both currencies suggests that we are likely to see further deterioration in the Euro Index and improvement in the USD Index in the near future. Taking these facts into account and combining them with the current relationship between the U.S. dollar and the PMs, we can conclude that the implications for the precious metal market are bearish. Please note that the exact target for gold is quite difficult to provide based on the gold chart alone. While it's likely that the final bottom will form below $1,150 and above $1,000 (or at least not much below this level), if we want to get a more specific price projection, we should use other techniques, especially those which worked in mid-2013 when the previous gold's low was formed.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

In our last essay we examined the situation in the US Dollar Index (from many perspectives) and the Euro Index, as many times in the past it gave us important clues about future precious metals' moves. Back then we wrote that the implications for the precious metal market were bearish just as the outlook for the Euro Index and just as it was bullish for the USD Index.

On the next trading day, after the essay was posted, gold, silver and mining stocks declined along with the European currency and hit their fresh monthly lows. Does it mean that the final bottom for the decline in gold, silver and mining stocks is already in?

Many times in our previous essays we wrote that if you want to be an effective and profitable investor, you should look at the situation from different perspectives and make sure that the actions that you are about to take are really justified. That's why in today's essay we'll examine gold and silver mining stocks to find out what kind of impact they can have on precious metals' future moves.

Additionally, it s been almost a month since we wrote in greater detail about the precious metals mining stock sector, so we thought that you might appreciate an update. As a reminder, on Nov. 8 we wrote that the outlook remained bearish and even though we couldn't rule out a few days of strength, it didn't seem that a rally would be a sustainable development.

This week we saw a major breakdown below two critical support levels: the long-term rising support line and the 2013 low. Taking this fact into account, we can conclude that the implications are clearly bearish for the coming weeks.

Now, let's have a look at the HUI Index. The chart below expresses a simplicity that betrays potential information on where this market may ultimately be heading.

(click to enlarge)

In our previous Premium Update, we wrote that the HUI Index extended declines and dropped below the previous 2013 low, which was a very bearish sign. Back then we also mentioned that a similar breakdown in mining stocks preceded the plunge in the entire precious metals sector in April and taking this fact into account we could expect big moves to the downside in the days or weeks ahead.

Looking at the above chart, we see that we have indeed seen a big move to the downside, even though it's been only a few days since the above was posted. This is another bearish confirmation, as back in 2008 the breakdown below the previous local low meant that the final sharp downswing was already underway. We expect the final bottom to be seen close to the 150 level.

What about the short term?

(click to enlarge)

Let's start by quoting what we wrote in Friday's Premium Update:

From the short-term point of view, we see that the situation has deteriorated recently. At the beginning of the week mining stocks declined below the previous 2013 low and stayed there for three consecutive trading days. This means that the breakdown is confirmed at the moment and the implications are bearish.

As you can see on the above chart, miners reached the medium-term declining support line created by the August and September high - similarly to what we saw at the beginning of the month. Back then, this line triggered a consolidation (just like now); however, as it turned out it was just a pause within a short-term decline.

Taking this fact into account and combining it with the confirmed breakdown below the previous 2013 low, the current decline could become a major, medium-term decline.

It seems that we indeed see mining stocks in a major medium-term decline as they dropped significantly this week.

There was even another breakdown - below the declining support line based on the August and September highs. The implications of the above chart remain bearish.

Finally, we would like to discuss the current situation in the gold-stocks-to-gold ratio.

(click to enlarge)

On the above chart, we clearly see that the situation has again deteriorated in recent days. On Monday, the HUI-to-gold ratio dropped slightly below its previous 2013 low and we saw it close there on Tuesday as well. The breakdown is not confirmed at the moment but just one more daily close below the previous 2013 low will make the situation much more bearish.

Summing up, the medium-term trend remains down, the decline is quite likely to accelerate shortly and the outlook for the mining stocks sector is very bearish. It seems that practically all markets - gold, silver, main stock indices - are going down right now (except for crude oil, where we just saw a major breakout on huge volume) and mining stocks are declining along with them. Actually, they are leading the way.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

In our last essay we examined the situation in the US Dollar Index (from many perspectives) and the Euro Index, as many times in the past it gave us important clues about future precious metals' moves. Back then we wrote that the implications for the precious metal market were bearish just as the outlook for the Euro Index and just as it was bullish for the USD Index.

On the next trading day, after the essay was posted, gold, silver and mining stocks declined along with the European currency and hit their fresh monthly lows. Does it mean that the final bottom for the decline in gold, silver and mining stocks is already in?

Many times in our previous essays we wrote that if you want to be an effective and profitable investor, you should look at the situation from different perspectives and make sure that the actions that you are about to take are really justified. That's why in today's essay we'll examine gold and silver mining stocks to find out what kind of impact they can have on precious metals' future moves.

Additionally, it s been almost a month since we wrote in greater detail about the precious metals mining stock sector, so we thought that you might appreciate an update. As a reminder, on Nov. 8 we wrote that the outlook remained bearish and even though we couldn't rule out a few days of strength, it didn't seem that a rally would be a sustainable development.

This week we saw a major breakdown below two critical support levels: the long-term rising support line and the 2013 low. Taking this fact into account, we can conclude that the implications are clearly bearish for the coming weeks.

Now, let's have a look at the HUI Index. The chart below expresses a simplicity that betrays potential information on where this market may ultimately be heading.

(click to enlarge)

In our previous Premium Update, we wrote that the HUI Index extended declines and dropped below the previous 2013 low, which was a very bearish sign. Back then we also mentioned that a similar breakdown in mining stocks preceded the plunge in the entire precious metals sector in April and taking this fact into account we could expect big moves to the downside in the days or weeks ahead.

Looking at the above chart, we see that we have indeed seen a big move to the downside, even though it's been only a few days since the above was posted. This is another bearish confirmation, as back in 2008 the breakdown below the previous local low meant that the final sharp downswing was already underway. We expect the final bottom to be seen close to the 150 level.

What about the short term?

(click to enlarge)

Let's start by quoting what we wrote in Friday's Premium Update:

From the short-term point of view, we see that the situation has deteriorated recently. At the beginning of the week mining stocks declined below the previous 2013 low and stayed there for three consecutive trading days. This means that the breakdown is confirmed at the moment and the implications are bearish.

As you can see on the above chart, miners reached the medium-term declining support line created by the August and September high - similarly to what we saw at the beginning of the month. Back then, this line triggered a consolidation (just like now); however, as it turned out it was just a pause within a short-term decline.

Taking this fact into account and combining it with the confirmed breakdown below the previous 2013 low, the current decline could become a major, medium-term decline.

It seems that we indeed see mining stocks in a major medium-term decline as they dropped significantly this week.

There was even another breakdown - below the declining support line based on the August and September highs. The implications of the above chart remain bearish.

Finally, we would like to discuss the current situation in the gold-stocks-to-gold ratio.

(click to enlarge)

On the above chart, we clearly see that the situation has again deteriorated in recent days. On Monday, the HUI-to-gold ratio dropped slightly below its previous 2013 low and we saw it close there on Tuesday as well. The breakdown is not confirmed at the moment but just one more daily close below the previous 2013 low will make the situation much more bearish.

Summing up, the medium-term trend remains down, the decline is quite likely to accelerate shortly and the outlook for the mining stocks sector is very bearish. It seems that practically all markets - gold, silver, main stock indices - are going down right now (except for crude oil, where we just saw a major breakout on huge volume) and mining stocks are declining along with them. Actually, they are leading the way.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

In our essay on precious metals from Nov. 22, we focused on the markets from the long-term perspective. As we wrote in the summary:

(…) the final bottom for the decline in gold, silver and mining stocks doesn't seem to be in just yet.

On the next trading day, after the essay was posted, gold, silver and mining stocks declined and dropped to their fresh monthly lows. Although we've seen some improvement in recent days, precious metals still have been trading in the narrow range.

Many times in the past, the situation in the U.S. dollar and the euro gave us important clues about future precious metals' moves. Therefore, today we'll examine the US Dollar Index (from many perspectives) and the Euro Index to see if there's anything on the horizon that could drive the precious metal market higher or lower in the near future. We'll start with the long-term USD Index chart (charts courtesy by stockcharts.com).

(click to enlarge)

From the long-term perspective, the situation hasn't changed much recently. The long-term breakout above the declining long-term support line has not been invalidated. Additionally, the USD Index reversed right in the middle of our target area. Therefore, from this perspective, it seems that the downward move - if it's not already over - will be quite limited because the long-term support line will likely stop any further declines.

Now, let's examine the weekly chart.

(click to enlarge)

Looking at the above chart, we see that at the beginning of the month the USD Index reached the 50-day moving average, which triggered a corrective move in the following weeks. With this downward move the U.S. dollar dropped to the low that we had seen three weeks ago, therefore, we might see a post-double-bottom rally in the coming weeks.

Keep in mind that from this point of view the current correction is still shallow, which is a bullish signal for the short term. As you can see on the above chart, recent weeks have formed a consolidation, which is likely a pause before further increases.

Let's check the short-term outlook.

(click to enlarge)

As you can see on the above chart, the USD Index extended its decline and dropped to the previously-broken support/resistance line created by the June low. Last week, the proximity to this support level (or comments from the Fed about the possibility of tapering the QE program - which we don't believe, by the way) triggered a sharp move up, which took the dollar above the level of 81 once again. Therefore, since this level was reached once again, it seems that we might see a similar rally once again. Additionally, the greenback formed a daily hammer (reversal) candlestick, which is another bullish sign.

On top of that, both happened right after the cyclical turning point, which amplifies their bullish implications. Connecting the dots, it seems that another move up could be seen shortly.

Let's now take a look at the medium-term Euro Index chart.

(click to enlarge)

As you see on the above chart, since the beginning of the week, the euro has continued its rally. The Euro Index moved above the level of 135 once again and corrected exactly 61.8% of its October-November decline (to 136.09).

At this point, it's worth mentioning the short-term rising support line based on the July and September lows, which is slightly above the 61.8% retracement. Looking at the above chart, we clearly see that despite the recent corrective upward move, the breakdown below this line hasn't been invalidated.

Combining these two facts, we can conclude that the move up is quite likely over and the decline can continue. If we see a move below 131.56, the bearish implications will be even stronger.

Having discussed the current situation in the U.S. currency, let's see how it may translate into the precious metals market. Let's take a look at the Correlation Matrix.

(click to enlarge)

The Correlation Matrix is a tool which we developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector (namely: gold correlations and silver correlations).

The correlation coefficients remain strongly negative as far as the short-term (30 trading days) link between precious metals and the USD Index is concerned. The 10-day column includes values close to 0, which simply means that gold didn't respond to dollar's move lower - which is a bearish sign.

Summing up, looking at the current situation in both currencies, we are likely to see weakness in the Euro Index and improvement in the USD Index on a short-term basis. As mentioned earlier, the USD Index reached its cyclical turning point and, taking this fact into account, it seems that the bottom of the current correction is already in. Additionally, the euro corrected exactly 61.8% of its October-November decline and approached the short-term rising support line without breaking it, which means that the move up is quite likely over. Therefore, currently, the implications for the precious metal market are bearish.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

In our essay on precious metals from Nov. 22, we focused on the markets from the long-term perspective. As we wrote in the summary:

(…) the final bottom for the decline in gold, silver and mining stocks doesn't seem to be in just yet.

On the next trading day, after the essay was posted, gold, silver and mining stocks declined and dropped to their fresh monthly lows. Although we've seen some improvement in recent days, precious metals still have been trading in the narrow range.

Many times in the past, the situation in the U.S. dollar and the euro gave us important clues about future precious metals' moves. Therefore, today we'll examine the US Dollar Index (from many perspectives) and the Euro Index to see if there's anything on the horizon that could drive the precious metal market higher or lower in the near future. We'll start with the long-term USD Index chart (charts courtesy by stockcharts.com).

(click to enlarge)

From the long-term perspective, the situation hasn't changed much recently. The long-term breakout above the declining long-term support line has not been invalidated. Additionally, the USD Index reversed right in the middle of our target area. Therefore, from this perspective, it seems that the downward move - if it's not already over - will be quite limited because the long-term support line will likely stop any further declines.

Now, let's examine the weekly chart.

(click to enlarge)

Looking at the above chart, we see that at the beginning of the month the USD Index reached the 50-day moving average, which triggered a corrective move in the following weeks. With this downward move the U.S. dollar dropped to the low that we had seen three weeks ago, therefore, we might see a post-double-bottom rally in the coming weeks.

Keep in mind that from this point of view the current correction is still shallow, which is a bullish signal for the short term. As you can see on the above chart, recent weeks have formed a consolidation, which is likely a pause before further increases.

Let's check the short-term outlook.

(click to enlarge)

As you can see on the above chart, the USD Index extended its decline and dropped to the previously-broken support/resistance line created by the June low. Last week, the proximity to this support level (or comments from the Fed about the possibility of tapering the QE program - which we don't believe, by the way) triggered a sharp move up, which took the dollar above the level of 81 once again. Therefore, since this level was reached once again, it seems that we might see a similar rally once again. Additionally, the greenback formed a daily hammer (reversal) candlestick, which is another bullish sign.

On top of that, both happened right after the cyclical turning point, which amplifies their bullish implications. Connecting the dots, it seems that another move up could be seen shortly.

Let's now take a look at the medium-term Euro Index chart.

(click to enlarge)

As you see on the above chart, since the beginning of the week, the euro has continued its rally. The Euro Index moved above the level of 135 once again and corrected exactly 61.8% of its October-November decline (to 136.09).

At this point, it's worth mentioning the short-term rising support line based on the July and September lows, which is slightly above the 61.8% retracement. Looking at the above chart, we clearly see that despite the recent corrective upward move, the breakdown below this line hasn't been invalidated.

Combining these two facts, we can conclude that the move up is quite likely over and the decline can continue. If we see a move below 131.56, the bearish implications will be even stronger.

Having discussed the current situation in the U.S. currency, let's see how it may translate into the precious metals market. Let's take a look at the Correlation Matrix.

(click to enlarge)

The Correlation Matrix is a tool which we developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector (namely: gold correlations and silver correlations).

The correlation coefficients remain strongly negative as far as the short-term (30 trading days) link between precious metals and the USD Index is concerned. The 10-day column includes values close to 0, which simply means that gold didn't respond to dollar's move lower - which is a bearish sign.

Summing up, looking at the current situation in both currencies, we are likely to see weakness in the Euro Index and improvement in the USD Index on a short-term basis. As mentioned earlier, the USD Index reached its cyclical turning point and, taking this fact into account, it seems that the bottom of the current correction is already in. Additionally, the euro corrected exactly 61.8% of its October-November decline and approached the short-term rising support line without breaking it, which means that the move up is quite likely over. Therefore, currently, the implications for the precious metal market are bearish.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

In our latest free essay, we focused on silver. We wrote: "the outlook for silver remains bearish and further declines should not surprise us." On the same day, after the essay was posted, silver declined sharply moving very close to the declining support line that we had featured in that essay. On a side note, it was actually a long-term support line that stopped the decline (for now).

With so much volatility this week, we have decided to zoom out a bit and take a look at the markets from the long-term perspective. Is the final bottom in for gold, silver and mining stocks? We have prepared 3 charts for you today that should help us deal with this issue. Let's start with the Dow-to-gold ratio (charts courtesy of stockcharts.com).

(click to enlarge)

That's one of the most important and useful ratios there are as far as long- and medium-term trends are concerned. In particular, the big price moves can be detected before they happen (note the breakout in the first months of the year that heralded declines in gold).

In Tuesday's Market Alert, we wrote the following:

The Dow-to-gold ratio moved above the 12.5 level - to 12.56. The breakout is small and unconfirmed by the moment, but we are one step closer to the next (and probably final) plunge in the precious metals sector.

With the ratio even higher today, we have a good possibility that the breakout will be confirmed and that we will see a big drop in the price of gold in the coming weeks or months.

Having discussed the above, let's move on to the chart featuring junior mining stocks. This is actually the only somewhat bullish chart that we feature today. This might seem encouraging, until you consider the fact that the previous small breakouts turned out to be fake moves and led to even bigger declines.

Although the juniors sector moved above the declining resistance line, we think that it's still too early to say that the breakout has been truly confirmed - especially when we take into account the position of the RSI.

Please note that the last two times when the indicator reached these levels, major medium-term tops were formed. Therefore, we would need to see a verification of the breakout first to view it as an important medium-term signal. This would be the case in any other breakout as well, but in case of the above chart, waiting for a verification seems particularly justified because we have already seen a false breakout at the beginning of this year - one which was followed by a significant decline in the entire precious metals sector.

Since we wrote the above, juniors have declined (in the preceding two weeks and also this week) and they look like they are about to invalidate the previous breakout, which would - naturally - have bearish medium-term consequences for the entire precious metals sector.

If the decline that we are likely to see in the precious metals sector takes juniors back below their declining red support/resistance line, we will have one more indication that the next major move will be to the downside.

Please note that in case of the junior mining stocks the next significant support is much below the current value of the TSX Venture Index, so the coming decline will likely be very significant.

Finally, we would like to discuss the current situation with the gold-stocks-to-gold ratio.

(click to enlarge)

On the above chart, we see that the situation has deteriorated in recent days. Since the beginning of the week, the HUI-to-gold ratio has declined and hit a fresh monthly low on Thursday. Despite this drop, the gold-stocks-to-gold ratio is still above its previous 2013 lows.

From this perspective, the downtrend remains in place, and it will remain in place as long as the HUI-to-gold ratio stays below the declining resistance line. Since the ratio is not that close to it, it doesn't seem that we will see a breakout soon. In fact, we don't expect to see one before another major plunge in the precious metals sector.

Summing up, the final bottom for the decline in gold, silver and mining stocks doesn't seem to be in just yet. Consequently, jumping in with both feet into the gold market might not be the best idea right now. Still, when and how that bottom is reached is a different matter and we encourage you to keep an eye out for technical signs that could help you not only enter the market at the right moment, but perhaps make money also while metals and miners decline.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

In our latest free essay, we focused on silver. We wrote: "the outlook for silver remains bearish and further declines should not surprise us." On the same day, after the essay was posted, silver declined sharply moving very close to the declining support line that we had featured in that essay. On a side note, it was actually a long-term support line that stopped the decline (for now).

With so much volatility this week, we have decided to zoom out a bit and take a look at the markets from the long-term perspective. Is the final bottom in for gold, silver and mining stocks? We have prepared 3 charts for you today that should help us deal with this issue. Let's start with the Dow-to-gold ratio (charts courtesy of stockcharts.com).

(click to enlarge)

That's one of the most important and useful ratios there are as far as long- and medium-term trends are concerned. In particular, the big price moves can be detected before they happen (note the breakout in the first months of the year that heralded declines in gold).

In Tuesday's Market Alert, we wrote the following:

The Dow-to-gold ratio moved above the 12.5 level - to 12.56. The breakout is small and unconfirmed by the moment, but we are one step closer to the next (and probably final) plunge in the precious metals sector.

With the ratio even higher today, we have a good possibility that the breakout will be confirmed and that we will see a big drop in the price of gold in the coming weeks or months.

Having discussed the above, let's move on to the chart featuring junior mining stocks. This is actually the only somewhat bullish chart that we feature today. This might seem encouraging, until you consider the fact that the previous small breakouts turned out to be fake moves and led to even bigger declines.

Although the juniors sector moved above the declining resistance line, we think that it's still too early to say that the breakout has been truly confirmed - especially when we take into account the position of the RSI.

Please note that the last two times when the indicator reached these levels, major medium-term tops were formed. Therefore, we would need to see a verification of the breakout first to view it as an important medium-term signal. This would be the case in any other breakout as well, but in case of the above chart, waiting for a verification seems particularly justified because we have already seen a false breakout at the beginning of this year - one which was followed by a significant decline in the entire precious metals sector.

Since we wrote the above, juniors have declined (in the preceding two weeks and also this week) and they look like they are about to invalidate the previous breakout, which would - naturally - have bearish medium-term consequences for the entire precious metals sector.

If the decline that we are likely to see in the precious metals sector takes juniors back below their declining red support/resistance line, we will have one more indication that the next major move will be to the downside.

Please note that in case of the junior mining stocks the next significant support is much below the current value of the TSX Venture Index, so the coming decline will likely be very significant.

Finally, we would like to discuss the current situation with the gold-stocks-to-gold ratio.

(click to enlarge)

On the above chart, we see that the situation has deteriorated in recent days. Since the beginning of the week, the HUI-to-gold ratio has declined and hit a fresh monthly low on Thursday. Despite this drop, the gold-stocks-to-gold ratio is still above its previous 2013 lows.

From this perspective, the downtrend remains in place, and it will remain in place as long as the HUI-to-gold ratio stays below the declining resistance line. Since the ratio is not that close to it, it doesn't seem that we will see a breakout soon. In fact, we don't expect to see one before another major plunge in the precious metals sector.

Summing up, the final bottom for the decline in gold, silver and mining stocks doesn't seem to be in just yet. Consequently, jumping in with both feet into the gold market might not be the best idea right now. Still, when and how that bottom is reached is a different matter and we encourage you to keep an eye out for technical signs that could help you not only enter the market at the right moment, but perhaps make money also while metals and miners decline.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Looking at the chart of silver from today's point of view, we see that at the end of the previous week, the white metal (similarly to gold) moved higher after Federal Reserve Chair Nominee Janet Yellen told that monetary stimulus tools shouldn't be removed too soon. If you recall, several days ago we wrote that gold could move higher but that that would just be a counter trend move and would likely be followed by further declines. On Monday, two top Fed officials from opposite sides of the policy spectrum, fueled expectations that the Federal Reserve could taper its bond buying program. Their comments pushed the price of silver to slightly above $20. Although yesterday Bernanke said that the Fed will maintain ultra-easy monetary policy for as long as needed, silver extended declines for a second session and hit a fresh three-month low. This, by itself, is a sign of weakness.

Please note that the price of the white metal is down approximately 33% this year, to some extent on concerns the Fed would begin cutting back its easy-money policy by trimming its $85-billion monthly bond purchasing program. To some extent, because the reasons didn't have to be fundamental, they could have been emotional/technical (silver got ahead of itself and needed to correct before rallying once again). In other words, there could have been a catalyst that has been undetectable using traditional fundamental analysis, which is why even long-term investors shouldn't forget to monitor the charts (or get in touch with someone who does).

Taking the above into account, today investors are turning their attention to the minutes of the Fed's October meeting, as well as a speech by Chairman Ben Bernanke and probably wondering what's next. What impact could the Fed minutes have on the price of silver? Let's see what the market thinks.

In today's commentary, we examine long- and short-term charts of silver to find out what the current outlook for the white metal is. We will start with the analysis of silver from the long-term perspective (charts courtesy by stockcharts.com).

(click to enlarge)

At the beginning of the previous week, silver dropped below the previous October lows (even taking intra-day lows into account). Moreover, the white metal not only confirmed the breakdown below the rising support line, it also moved below the 61.8% Fibonacci retracement level based on the June-August rally ($20.80). This means that the upward correction might already be over.

On Friday, the breakdown below the 61.8% Fibonacci retracement level was confirmed as silver closed below this level for the third consecutive trading day. This made the situation more bearish.

Please note that the RSI indicator is not oversold at this time, so we might see significant declines in the coming weeks (it's not that RSI is suggesting that at this time, but it doesn't "say" that it's unlikely).

Finally, the support line based on the 2008 and 2013 lows creates an initial downside target - something that silver is likely to reach (and pause / bounce) before moving to our final target level around the $16 level. At this time, this initial target is very close to $19.50.

This week, we didn't see any improvement. Instead, silver declined once again, confirming the bearish outlook.

Let's move to the short-term chart to see the very recent price moves more clearly.

(click to enlarge)

On the above chart, you can see the breakdown below the 61.8% retracement more clearly.

There are also other interesting things visible on this chart. We can see that the recent decline in the SLV ETF materialized on significant volume, which suggests that it was no accident. Interestingly, we saw something similar (a visible but not huge plunge) in early June, which preceded the real downswing and investors had several days to prepare.

The second interesting thing that we can see above is the downside target for the SLV ETF, very close to the $19 level. The target is created by the red dashed line, which is a parallel line to the declining resistance line based on the most recent local tops. It is more or less in tune with the initial target for spot silver at $19.50.

Summing up, taking into account the above analysis, we can conclude that the outlook for silver remains bearish and further declines should not surprise us. We would like to stress that our price target levels are something that we view as very likely (meaning that they are very likely to at least stop the decline for a while when they are reached) at the moment of posting this essay, but given this month's volatility, it could be the case that these targets will be adjusted shortly.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Looking at the chart of silver from today's point of view, we see that at the end of the previous week, the white metal (similarly to gold) moved higher after Federal Reserve Chair Nominee Janet Yellen told that monetary stimulus tools shouldn't be removed too soon. If you recall, several days ago we wrote that gold could move higher but that that would just be a counter trend move and would likely be followed by further declines. On Monday, two top Fed officials from opposite sides of the policy spectrum, fueled expectations that the Federal Reserve could taper its bond buying program. Their comments pushed the price of silver to slightly above $20. Although yesterday Bernanke said that the Fed will maintain ultra-easy monetary policy for as long as needed, silver extended declines for a second session and hit a fresh three-month low. This, by itself, is a sign of weakness.

Please note that the price of the white metal is down approximately 33% this year, to some extent on concerns the Fed would begin cutting back its easy-money policy by trimming its $85-billion monthly bond purchasing program. To some extent, because the reasons didn't have to be fundamental, they could have been emotional/technical (silver got ahead of itself and needed to correct before rallying once again). In other words, there could have been a catalyst that has been undetectable using traditional fundamental analysis, which is why even long-term investors shouldn't forget to monitor the charts (or get in touch with someone who does).

Taking the above into account, today investors are turning their attention to the minutes of the Fed's October meeting, as well as a speech by Chairman Ben Bernanke and probably wondering what's next. What impact could the Fed minutes have on the price of silver? Let's see what the market thinks.

In today's commentary, we examine long- and short-term charts of silver to find out what the current outlook for the white metal is. We will start with the analysis of silver from the long-term perspective (charts courtesy by stockcharts.com).

(click to enlarge)

At the beginning of the previous week, silver dropped below the previous October lows (even taking intra-day lows into account). Moreover, the white metal not only confirmed the breakdown below the rising support line, it also moved below the 61.8% Fibonacci retracement level based on the June-August rally ($20.80). This means that the upward correction might already be over.

On Friday, the breakdown below the 61.8% Fibonacci retracement level was confirmed as silver closed below this level for the third consecutive trading day. This made the situation more bearish.

Please note that the RSI indicator is not oversold at this time, so we might see significant declines in the coming weeks (it's not that RSI is suggesting that at this time, but it doesn't "say" that it's unlikely).

Finally, the support line based on the 2008 and 2013 lows creates an initial downside target - something that silver is likely to reach (and pause / bounce) before moving to our final target level around the $16 level. At this time, this initial target is very close to $19.50.

This week, we didn't see any improvement. Instead, silver declined once again, confirming the bearish outlook.

Let's move to the short-term chart to see the very recent price moves more clearly.

(click to enlarge)

On the above chart, you can see the breakdown below the 61.8% retracement more clearly.

There are also other interesting things visible on this chart. We can see that the recent decline in the SLV ETF materialized on significant volume, which suggests that it was no accident. Interestingly, we saw something similar (a visible but not huge plunge) in early June, which preceded the real downswing and investors had several days to prepare.

The second interesting thing that we can see above is the downside target for the SLV ETF, very close to the $19 level. The target is created by the red dashed line, which is a parallel line to the declining resistance line based on the most recent local tops. It is more or less in tune with the initial target for spot silver at $19.50.

Summing up, taking into account the above analysis, we can conclude that the outlook for silver remains bearish and further declines should not surprise us. We would like to stress that our price target levels are something that we view as very likely (meaning that they are very likely to at least stop the decline for a while when they are reached) at the moment of posting this essay, but given this month's volatility, it could be the case that these targets will be adjusted shortly.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.